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The Basics of Capital Gains Tax and Property in Australia: 

If you own a capital asset, such as real estate or shares and sell it, you will either make a capital gain or a capital loss. All capital gains and losses must be declared in your annual income tax return, and you must pay a Capital Gains Tax. For Australian residents, capital gains tax will apply to assets kept anywhere in the world.

What are Capital Gains and Losses?

You make a capital gain when the proceeds you receive when disposing of the asset are more significant than what it costs to acquire. A capital loss is an opposite when the final value of the asset is less than its original cost base.

Real Estate and Capital Gains Tax:

Most real estate, such as vacant land, commercial premises, rental properties, holiday houses and hobby farms, is subject to capital gains tax.

However, personal assets such as your principal place of residence (home), car and furniture are exempt from capital gains tax. It also does not apply to depreciating assets, such as business equipment or fittings in a rental property. The most common situation when capital gains tax is calculated is when real estate is sold.

If you’re a co-owner of the property, you’ll make a capital gain or loss proportionate to your property ownership.

How are Capital Gains and Losses Calculated? 

Accurate record-keeping is important and essential when calculating capital gains or losses. Make sure you retain a copy of the purchase contract and all receipts for expenses relating to the purchase. These include stamp duty, legal fees, and property valuation fees.

You will also need to record all relevant expenses relating to the capital gains tax event (CGT event), for example, the sale contract and forms of legal fees and stamp duty.

This information forms the basis of the capital gain or loss calculation.

When Do I Need an Independent Property Valuation in a CGT Event? 

If you own real estate that was previously exempt from capital gains tax but then becomes subject to capital gains tax, you should seek a valuation at the time of the CGT event.

For example, if you decide to move out of your principal place of residence and turn it into an investment property, you should engage a valuer as soon as it goes on the rental market.

It is possible to do a retrospective valuation. However, it can be inaccurate, time-consuming and costly. Australian Valuers suggests combining a capital gains tax valuation with a Tax Depreciation Schedule to increase accuracy in calculating the capital gain while minimising your tax obligations on an investment property.

These valuations can be retrospective. If you did not have a valuation at the time, Local Valuers

could prepare a valuation as of a previous date to meet your tax reporting requirements. 

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